Terry Murden: Double trouble for Digby

TERRY MURDEN

THERE is a new business troubleshooter on the box. Lord Jones of Birmingham, better known as Digby, presents the updated version of the 1990s Troubleshooter show that featured Sir John Harvey-Jones.

Digby may match Sir John’s physical stature, but his predecessor’s famous flashy ties have been exchanged for his own almost-as-famous Union Flag cufflinks and he will impose his own style on the revived BBC series.

The format is similar: advising struggling businesses on how to fix the mess they are in. So who might be a couple of ideal candidates? How about Co-operative Group and Tesco?

These two giants of the corporate world have certainly got a lot of cleaning up to do, and both will be back in the spotlight this week with scary stories that will have nervous viewers only able to watch through their fingers.

The Co-op’s television appearances are memorable for a couple of catchphrases. “It’s all at the Co-op – now!” it used to say. These days it tells us that it is “Good with food”. Well, it’s not been particularly good at banking. Last year was the bank’s annus horribilis: a £1.3 billion pre-tax loss and expectations of further losses in the next two years; £516 million of impairments on bad loans; £412m set aside for payment protection insurance mis-selling; a £400m hole in its balance sheet that will need plugging in a rights issue; and the embarrassment of losing a chairman caught buying drugs. And, of course, it won and lost the auction to acquire the assets that Lloyds Banking Group was forced to sell.

If Lord Jones could fix that lot he would deserve to be canonised. The Co-op has already brought in hedge funds who now hold a majority stake in the bank ahead of a flotation that has raised questions about how it can cling on to its mutual status. Meantime, it has handed its new chief executive, Niall Booker, £4.6m for his first 18 months in charge – a figure that even he acknowledges will prompt some strong feelings.

Tesco’s plight is not in the one-foot-in-the-grave category, but chief executive Philip Clarke could never have foreseen the challenge he faces when he succeeded the almost deified Sir Terry Leahy at the helm of Britain’s biggest supermarket group.

Clarke has been forced to pull out of the US and find ways of bolstering a flagging UK business against the growing onslaught of the German discounters who are eating into a market which the big four appeared to have sewn up.

He will have to come out fighting this week against an agitated investor community which is unimpressed at the pace of his £1bn turnaround plan. Falling trading profits are a visible indication of consumers opting for rival stores, not only on price but because Tesco stores are often regarded as cold and unwelcoming.

There is a lack of consensus on Clarke’s “family of brands” strategy, which now includes Giraffe restaurants and Blinkbox entertainment. Then there is the man himself, who the harshest critics say is simply not up to the job.

Sir John Harvey-Jones never flinched from telling people they were unsuited to running their companies. What would Digby say?

Cautious debut for new face Exova

THE first Scottish company to float on the main market of the London Stock Exchange for two years made a cautious start when shares began trading on Friday, although the £550 million valuation on materials testing firm Exova was some £200m lower than forecast.

What is striking about this is that a company that is making a profit and is targeting a progressive dividend policy saw no premium on its shares, while a number of others which have no hope of making a profit any time soon – such as Twitter – have been valued at astronomical levels.

However, reality may be about to kick in. Technology stocks led the markets lower amid fears of a repeat of the last dotcom crash. Billions were wiped off values.

Analysts preferred to see the 80 points fall on the FTSE 100 as an overdue correction. While the general direction of the markets remains uncertain, the fall eroded the prospects of a few debutants.

Probably because the markets have looked frothy, nervous investors knocked back the flotation price of Edinburgh-based Exova to 220p from an indicative price as high as 260p.

It closed at 221p, and the fact that it was not a technology stock probably saved it from a fall.

Big names leave Cairn

THE surprise news of the week was the departure of long-serving deputy chief executive Mike Watts and chief financial officer Jann Brown, below, from the board of Cairn Energy. Their going, after next month’s annual meeting, will coincide with founder and chairman Sir Bill Gammell stepping down. It leaves the board with just two executive directors, CEO Simon Thomson and new fin­ance director James Smith, who joined from Rothschild.

They face a potentially long battle with Indian authorities over tax while convincing investors that the company can have more success off the coast of Africa than it had in Greenland.